Business activity growth across the U.K.’s service sector accelerated slightly in July as demand saw the strongest upturn since May 2023, further supporting output at service providers. Employment in the U.K. service sector also rose at the fastest pace in over a year, while business confidence rebounded from June’s recent low.
As for prices, July data revealed further stubbornness as both input costs and output charges rose at historically elevated rates. That said, they were both among their weakest in over 3.5 years.
The seasonally adjusted S&P Global U.K, Services PM Business Activity Index posted 52.5 in July, a slight increase from June’s 52.1. This signals a modest but faster pace of expansion in output levels across the U.K.’s service sector and marks the first time since April that growth has accelerated.
Stronger sales boost growth
U.K. service firms attribute the rise in business activity across the sector to higher sales volumes. The PMI survey also reveals a strong and quicker expansion in new business intakes across the U.K. service sector. Generally stronger demand conditions were evident, with new customer wins and an influx of new contracts. The overall improvement in sales was the strongest since May last year.
“Still, there continues to be sluggish progress on inflation. The positive takeaway is that price pressures, both regarding input costs and output prices, are at their lowest since early 2021,” stated Joe Hayes, principal economist at S&P Global Market Intelligence.
Overseas markets also contributed to the rise in sales in June with firms reporting greater new business from customers in Europe, North America, and Asia. The increase in new export orders was also notable in July.
Employment grows further
With demand rising, the U.K. service sector raised employment further in July, extending the current period of job creation this year. Workforce growth also rose to the strongest since June 2023. However, despite an expansion in new business that outpaced the concurrent rise in activity, backlogs of work declined for the 14th straight month.
Looking ahead, business confidence in July rose with the Future Activity Index rebounding from June’s recent low to a five-month high. The conclusion of the 2024 general election period was partially a factor, with greater certainty around domestic politics generating optimism.
Read: Optimism grows for U.K. markets as Bank of England slashes rates, boosts growth outlook
Private sector activity grows
The seasonally adjusted S&P Global UK PMI Composite Output Index picked up slightly in July, rising from 52.3 in June to 52.8. This signaled a moderate and slightly faster expansion in private-sector economic activity.
In addition, growth accelerated in the U.K. construction sector, with July seeing much faster increases in both activity and new orders during the month. The headline S&P Global UK Construction PMI rose sharply to 55.3 in July from 52.2 in June. The data revealed a monthly expansion in total activity in the construction sector, extending the current trend of growth to five months. Moreover, the rate of expansion in the construction sector was the fastest since May 2022.
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